TAKING THE MEASURE OF THE 'NEW ECONOMY'

NEW RULES FOR THE NEW ECONOMY
10 Radical Strategies for a Connected World
By Kevin Kelly
Viking 179pp $19.95

THE WEIGHTLESS WORLD
Strategies for Managing the Digital Economy
By Diane Coyle
MIT 272pp $25

NEW RULES FOR A NEW ECONOMY
Employment and Opportunity in Postindustrial America
By Stephen A. Herzenberg, John A. Alic, and Howard Wial
Cornell 216pp $26.50

In many ways, the term ''New Economy'' does not do justice to the changes going on in the U.S. and the world today. The most obvious differences between now and a few years ago include lower unemployment, an absence of inflation, startlingly low interest rates, and the amazing growth of new industries such as electronic commerce. At the same time, the increasing globalization of economic activity has brought new risks. But the changes that have produced the New Economy go beyond economics. They are also technological, political, institutional, and organizational.

Not surprisingly, then, we are seeing books that have similar titles coming at the New Economy from different angles. Like the blind men inspecting the elephant, these three volumes have all caught hold of different pieces of a very large animal. New Rules for the New Economy by Kevin Kelly, executive editor and one of the founding editors of Wired magazine, is primarily a manifesto dealing with business strategy in a networked economy. The Weightless World by Diane Coyle, economics editor of Britain's The Independent, explores how politics and government need to adapt to the new realities of technology. And New Rules for a New Economy by Stephen A. Herzenberg and Howard Wial of the Keystone Research Center, a Pennsylvania think tank, and John A. Alic, a consultant based in Washington, proposes some ways to change the workplace and labor markets to meet the New Economy's challenges.

Kelly's book is probably the most provocative, but his vision is far too narrow. Not surprisingly, given his background, he starts with the basic premise that the entire global economy will turn out to be Silicon Valley and the Internet writ large. In his view, understanding networks will turn out to be the key to success. ''Communication...is not just a sector of the economy,'' writes Kelly. ''Communication is the economy.''

Starting from this assumption, he lays out a set of principles--aphorisms, really--for business success. His first rule is ''Embrace the Swarm,'' by which Kelly means companies should focus on networks and connections. Other rules include ''Feed the Web First,'' ''Opportunities before Efficiencies,'' and ''Follow the Free.'' The last of these encourages businesses to achieve success by giving products away, citing the plummeting prices of microprocessors and the way that Microsoft Corp. and Netscape Communications Corp. competed for market share by providing browsers for free.

But while the chip and the Net are important, there are big chunks of the economy--health care, education, government, financial services--that at least so far seem to work on different principles. So while it may be true on the Internet that ''prices move inexorably toward the free,'' there is no reason to expect hospitals to start giving away health-care services, for example.

Moreover, Kelly never acknowledges that the Internet itself is still in flux, and that the best business model for networks is not yet clear. Sure, companies such as Yahoo! have run up big stock valuations by bundling free services, from E-mail to online phone directories, but it's not obvious that this approach will make money in the long run.

Finally, Kelly's book barely mentions government, politics, or the potential for things going wrong. Kelly wholeheartedly embraces the techno-libertarian philosophy that technology can render government irrelevant. ''Eventually technical standards will become as important as laws,'' writes Kelly. By saying this, he misses the key point that government policy provides the framework in which technology operates. Indeed, high-tech companies, long disdainful of Washington, have taken an increasing interest in policy in recent years. Kelly's exclusive focus on technology seriously undermines the usefulness of New Rules as a guide to business strategy.

By contrast, Coyle pays far more attention to the political implications of the New Economy, or what she calls the weightless world. She starts with a premise that Kelly might easily accept: that the economy consists increasingly of knowledge-intensive services and goods. Compared with the steel and autos that were the mainstays of the industrial economy, high-value outputs such as computer chips, software, and financial services are simply less massive--hence the title of the boOk.

But Coyle is less impressed with technology itself than with how it affects people and institutions. She argues That ''weightless politics'' requires decentralization of power and authority. ''Local politicians will know more about what is happening in the economy than national leaders can gain from the official statistics and surveys,'' writes Coyle. As a result, ''government will need to devolve power, probably to the level of cities.''

Moreover, not just political power but economic activity needs to be brought down to the local level, according to Coyle. One example is local exchange- trading systems, which are basically ways of setting up a local money system in a community--in effect, an organized barter system. More than 500 of these schemes exist in Britain and Australia, notes Coyle, providing a way of jump-starting job creation without an infusion of government funds. In the U.S., one example is Ithaca, New York, which has an alternative currency called 'Ithaca Hours' that allows locals to trade, say, odd-job labor for other services.

Coyle is concerned with how governments can help people cope with risk. ''The priority for policymakers must be to equip people better to deal with change and uncertainty,'' she writes. But to Coyle, that means the government should be a teacher, rather than a nanny. She would go even further with reform of the existing welfare state. What's needed instead of a dole are more investment in training and education and a more flexible system of taxation and benefits that fits the way that people really live.

Probably the weakest book of the three is New Rules for a New Economy. Originally intended to be a report for the Office of Technology Assessment, before that federal agency was closed down in 1995, the book is both academic and somewhat backward-looking. Like The Weightless World, it is concerned with economic anxiety and job insecurity. But there's a sense that the authors, if they could, would like to turn the clock back to an earlier era, as suggested by the title of the first chapter, ''Recreating the Prosperity of the Past in the Economy of the Future.'' Moreover, with the Internet not mentioned, the book seems dated.

Nevertheless, this book stands above the other two in its focus on changes in the workplace. One key proposal for buttressing the power of workers in a global economy is the creation of craft-type unions, which cut across companies in an industry. Current policies ''effectively deny representation to many workers who move among small firms,'' observe the authors. Still, they do not pay sufficient attention to Silicon Valley, the place where workers flow most easily between companies.

Of these three books, the one with the freshest ideas and the broadest appeal is The Weightless World. Yet they all have something to offer, at a time when people are trying to understand the combination of economic vigor and risk with which we live.